Monday, 23 April 2012

The unwitting move towards a global gold standard

FT
"Professor Lew Spellman, from the McCombs School of Business at the University of Texas at Austin, has an interesting new post out on the changing role of gold in the global economy.
It relates to the notion that a shortage of safe assets may be driving an epic hunt for “safe collateral” — driving down yields on traditional fixed-income investments — because there are more debt liabilities/obligations than safe collateral in the system.
In a zero-yielding environment like this, he believes gold begins to look remarkably attractive. This is especially the case if gold remains a liquid store of value, which is widely accepted as collateral across the system. What’s more, there’s little to differentiate it from a zero-yielding Treasury bond. In fact, the Treasury bond eventually expires, while gold doesn’t. ....." (H/T Guido Fawkes)